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10/1/2014 - LIFE COMPANY MORTGAGE RETURNS DIP IN SECOND QUARTER 2014

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Life Company Mortgage Returns Dip in Second Quarter 2014

 BOSTON, October 1, 2014 – Commercial mortgage loans held by life insurance companies returned 2.23 percent in second quarter 2014, down slightly from first quarter’s total return of 2.43 percent, according to the LifeComps Commercial Mortgage Loan Index.
 
Income contributed 1.30 percent and price added 0.93 percent.  Price return was positive for the second consecutive quarter due to tighter mortgage spreads and a downward shift in the treasury yield curve.  Treasury yields fell for maturities over two years with the yield on the benchmark 10-year treasury declining 20 basis points over the quarter.  
 
The annual return jumped to 6.15 percent from 1.84 percent last quarter as negative performance from second quarter 2013 rolled out of the calculation.  Income contributed 5.30 percent and price 0.85 percent.  For the year, lower mortgage spreads outweighed the negative effect of slightly higher treasury yields to produce the first price gain for the annual period after four consecutive quarters of loss.

Of the four major property types, retail performed best for the quarter and the year.


Commercial Mortgage Loan – Total Return by Property Type as of June 30, 2014

Property

Quarter

12 months

Apartments

2.46%

6.05%

Office

2.15%

6.06%

Retail

2.47%

6.26%

Industrial

1.82%

5.99%

All*

2.23%

6.15%

*Includes hotel, mixed use, and other commercial


About LifeComps

The LifeComps Commercial Mortgage Loan Index is the only published benchmark for the private commercial mortgage market based on actual mortgage loan cash flow and performance data, which has been collected quarterly from participating life insurance companies since 1996. Active loans in the LifeComps Index number approximately 5,000 with an aggregate principal balance of $97 billion and market value of $104 billion. The weighted average duration is 4.9 years and average reported loan-to-value is 52 percent.
 
Since its inception, the LifeComps database has tracked individual cash flows on more than 21,000 loans with principal balances totaling in excess of $280 billion. More than 6,500 loans totaling $100 billion have been tracked from origination to disposition. 

Participating life insurers include Allstate Life Insurance Company, CIGNA Investment Management, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial, Prudential Insurance Company of America, and TIAA.  For more information, visit www.lifecomps.com.

 

 


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